The economy in October was broadly stable, according to the Bank of Thailand.
According to its report on last month’s economic and monetary conditions, overall private consumption continued to be subdued, and merchandise exports had yet to recover in line with improving global demand, delaying the recovery in manufacturing production and private investment.
The tourism sector expanded, albeit at a slower pace after China’s new tourism law.
Inflation rose slightly while unemployment remained low. The current account posted a surplus thanks to a positive trade balance. The capital account was in deficit owing to debt-securities investment by Thais as well as an increase in overseas deposits by commercial banks to manage their foreign-exchange positions. The balance of payments registered a slight deficit.
Private consumption was unchanged, with October’s Private Consumption Index (PCI) at a level comparable to a year ago, as households remained cautious on spending given weakening confidence and elevated indebtedness.
While consumption of non-durable items – in particular, merchandise imports, household electricity, and fuel – grew at a moderate pace, expenditure on durable items, especially automobiles, dropped significantly from last year’s elevated level under the first-time-car-buyer scheme.
Merchandise exports had yet to recover in line with improving global demand. October export value stood at US$19.038 billion (Bt611.3 billion), falling by 0.5 per cent year on year because of two key factors.
First, a number of industries faced supply-side constraints. There was a supply shortfall in shrimp production due to disease, and exports of electronics and parts increased only slightly because of limited production capability to take full advantage of the increasing global demand for high-technology items.
Second, steel and metal exports fell from a high base last year.
However, other exports such as automobiles, machinery and equipment, and petrochemical products improved from the same period a year ago.
Manufacturing production continued to contract year on year in line with restrained consumption and exports. The Manufacturing Production Index (MPI) dropped by 4 per cent year on year, primarily because of a fall in automobile production, as an increase in foreign orders could not compensate for a sharp decline in domestic orders, and to a contraction in frozen-shrimp production because of the disease.
However, there were special factors that caused unusually high levels of production in certain industries last month. Beer producers built up inventories to normal levels after the new excise-tax rates were finally clarified, and oil producers raised production to comply with the new regulation on oil reserves as stipulated by the Energy Policy and Planning Office.
With production of automobiles, frozen shrimp and other special factors mentioned above excluded, manufacturing production would have grown marginally in line with softened domestic demand.
Weak manufacturing production weighed on private investment. Some businesses postponed their investments awaiting clearer signs of a recovery in the economic outlook. The Private Investment index (PII) contracted by 4.9 per cent year on year, mainly from declines in commercial-vehicle sales and imported machinery and equipment, in part because of the high base given post-flood reconstruction last year.
Meanwhile, construction investment expanded at a slower pace in line with weakening business sentiment.
Merchandise imports registered $18.701 billion, down by 4.6 per cent year on year on account of declines in imported capital goods, raw materials, intermediate goods (excluding fuel), and automobiles and parts.
Farm income rose by 5.1 per cent year on year. Agricultural output, particularly rice production, expanded with favourable weather conditions, and rubber production continued to rise thanks to the previous expansion of planting area. However, shrimp production remained affected by the disease.
Farm prices slightly declined, held down by rice prices, which moved in tandem with falling global prices due to good harvests in major producing countries. Rubber prices also fell because of excess supply and high inventory levels in China, a major importing country.
The tourism sector expanded with 2.1 million foreign arrivals, rising by 14.7 per cent year on year. The pace of growth in tourist arrivals softened from the preceding months, however, with fewer Chinese tourists after the implementation of Beijing’s new tourism law. Meanwhile, arrivals from other countries continued to expand robustly.
Fiscal spending declined from the same period last year. This was attributable both to the delay in the enactment of the Annual Expenditure Budget Act for fiscal year 2014 and to last year’s high base because of accelerated government spending. Government cash receipts rose thanks mainly to corporate income-tax receipts carried over from the previous month.
The government’s cash balance registered a deficit of Bt99 billion in October.
Headline inflation edged up to 1.46 per cent on increases in fresh-food prices as a result of a limited supply of vegetables and fruits caused by unfavourable weather for these products. Core inflation stood at 0.71 per cent, up slightly as prices of prepared food and alcohol rose.
The unemployment rate remained low.